| No | SDES-2020-16 |
|---|---|
| Title | Public Investment and Labor Market Flexibility |
| Author | Chun-Hung Kuo and Hiroaki Miyamoto |
| Abstract | This paper examines how labor market flexibility affects the output effect of a public investment shock by using a panel data of OECD countries. We identify the public investment shock as a forecast error of public investment spending and employ the local projection method to estimate its effect on output. Our empirical analysis shows that labor market flexibility affects the output effect of the public investment shock. While a positive public investment shock boosts output significantly in economies with flexible labor markets, output responses are not statistically significant in economies with rigid labor markets. |
| Revised version published in |